Whitney issued her outlooks late Wednesday, a day after cutting estimates for Citigroup Inc (C.N), Bank of America Corp (BAC.N), JPMorgan Chase & Co (JPM.N) and Wachovia Corp WB.N, the four largest U.S. commercial banks. She said Citigroup’s first-quarter write-down could total $13.12 billion. [ID:nN26407454]

The earlier cuts fanned fears that credit and housing crises will crimp earnings at banks and brokerages for a longer period of time. Major U.S. financial sector indexes fell 3.5 percent to 4 percent on Wednesday, roughly four to five times larger than the declines in broader U.S. stock indexes.

Whitney now expects Merrill to lose $3.00 per share in the first quarter, after previously forecasting a profit of 45 cents per share. She also cut her 2008 profit-per-share forecast to 20 cents from $4.00.

According to Reuters Estimates, analysts on average expect profit per share of 17 cents and $3.82 for the respective periods.

The analyst wrote that Merrill faces write-downs of $1.84 billion on collateralized debt obligations, $1.17 billion on below-prime “Alt-A” home loans, $950 million on leveraged loans to fund buyouts, $571 million on commercial mortgages and real estate, and $1.5 billion of other write-downs.

Whitney also wrote that it is unclear whether Chief Executive John Thain will try to raise more capital, perhaps through hybrid securities, after having raised $12.8 billion since December. She also said Merrill faces a “highly disruptive year” of reorganization and downsizing, coinciding with subdued fixed-income capital markets activity.

UBS, meanwhile, may suffer a first-quarter loss of $2.75 per share, Whitney wrote. She previously forecast a 72 cents per share profit. The analyst cut her 2008 profit per share forecast to 45 cents from $3.70.

Whitney wrote that UBS faces write-downs of $6.86 billion on CDOs, $3.19 billion on “Alt-A” loans, $650 million on leveraged loans, and $355 million on commercial real estate.

UBS has been the European bank hit hardest by the U.S. subprime mortgage crisis. It has reported about $18 billion of subprime-related losses, and estimated about $80 billion of remaining exposure to other investments that some analysts and investors consider risky.

Whitney rates both banks “underperform.” She said Merrill trades at 1.5 times fourth-quarter book value and UBS at 1.6 times, levels she considers “relatively rich.”

Merrill shares closed Wednesday at $44.42 on the New York Stock Exchange. UBS shares closed at 29.34 Swiss francs. (Editing by Lincoln Feast)